Gold prices hit record highs on safe haven amid election uncertainty

Investing.com -- Gold prices hit a record high on Friday, benefiting from safe haven demand with just weeks left to a closely contested U.S. presidential election, while an interest rate cut by the European Central Bank also helped. 

At 09:50 ET (13:50 GMT), Spot gold rose 0.8% to $2,713.18 an ounce, while gold futures expiring in December rose 0.8% to $2,728.30 an ounce, both climbing to record levels Friday. Gold buoyed by pre-election safe haven demand 

Bullion prices broke out of a tight trading range seen in the past two weeks, hitting new peaks as the U.S. election approached. 

Recent polls showed Vice President Kamala Harris and former president Donald Trump set for a tight presidential race, with less than three weeks left to the ballot. 

The disparity in the stances of both candidates spurred increased uncertainty over what the results of the election will entail.

While media polls showed Harris with a small lead over Trump, prediction and betting markets largely leaned towards a Trump victory, sparking more uncertainty over the potential outcome. 

Gold was also favored by safe haven demand as the Middle East conflict raged on. Traders were bracing for Israel’s retaliation against Iran over an early-October attack.  Gold to go higher still - UBS

The price of gold is seen driving higher over the next 6 to 12 months thanks to declining interest rates and "strong" central bank purchases of the yellow metal, according to analysts at UBS.

In a note to clients, the UBS analysts argued that demand for gold should stay elevated as central banks and other financial institutions are "likely [...] to add further to gold reserves" -- albeit at a more tepid pace than in the first half of 2024 -- in a bid to diversify their holdings and offset various potential risks.

These purchases, along with an anticipated move by the Federal Reserve to pivot into a cycle of policy easing, are tipped to put gold prices at $2,900 per ounce by September 2025, the analysts said. The relationship between rates and gold has historically been inverse, with a dip in rates typically pushing up gold prices. Gold brushes off stronger dollar

The yellow metal firmed despite pressure from a stronger dollar , as the greenback hit an over 2-½ month high this week. 

The dollar was boosted chiefly by stronger-than-expected retail sales data, and another print showing weekly jobless claims fell, pointing to strength in the labor market. 

The readings furthered the notion that the Federal Reserve will cut interest rates by a smaller margin in the coming months.

But a 25 basis point cut by the ECB indicated that major global central banks were still set to cut rates further, with a lower rate environment likely to support gold and other non-yielding assets. 

“The precious metal found support from the ECB rate cut, which reminded the market that most central banks have gone into easing mode. This helped it shrug off economic data, which could slow the Fed’s rate cutting cycle,” ANZ analysts wrote in a note, adding that haven demand for gold also remained in play. 

(Ambar Warrick contributed to this article.)

Source: Investing.com